In response to President Trump’s Executive Order 13813, the Departments Health and Human Services, Labor and the Treasury (the Departments) are proposing regulations to expand the availability of short-term, limited-duration insurance by amending the definition of short-term, limited-duration insurance. This change is proposed to apply 60 days after publication of final regulations in the Federal Register.
What is Short-Term, Limited-Duration Insurance?
Short-term, limited-duration insurance is a type of health insurance coverage that was designed to fill temporary gaps in coverage that may occur when an individual is transitioning from one plan or coverage to another plan or coverage. Although not an excepted benefit under Code Sec. 9831, it is exempt from the Affordable Care Act (ACA) imposed individual-market requirements because it is not considered individual health insurance coverage. Thus, insurers providing short-term coverage do not have to cover (among other things) pre-existing conditions.
The Proposed Change
Under the proposed change, short-term limited duration insurance may offer a maximum coverage period of less than 12 months after the original effective date of the contract. The proposed definition provides that the expiration date specified in the contract takes into account any extensions that may be elected by the policyholder without the issuer’s consent.
Historically, the maximum term for a short-term policy was less than 12 months, but that was changed to less than 3 months under regulations issued in 2016 ( T.D. 9791). This move by the Obama Administration made it more difficult for insurers to offer stripped down, short-term coverage to the young and healthy in competition with individual market ACA-compliant coverage that has to be available to any applicant.
Why it Matters
The Trump Administration has made it a priority to allow short-term insurance as a means of avoiding Obama-era ACA regulations that impose consumer protections on insurers and require them to cover any applicant. To the extent insurers take up the opportunity, short-term, limited duration coverage should be less expensive.
Although these changes are primarily aimed at the individual insurance markets rather than group plans, the definition of short-term, limited-duration insurance is relevant to group health plans and group health insurance issuers. For example, an individual who loses coverage due to moving out of an HMO service area in the individual market triggers a special enrollment right into a group health plan ( Reg. §54.9801-6(a)(3)(i)(B)). Also, a group health plan that wraps around individual health insurance coverage is an excepted benefit if certain conditions are satisfied ( Reg. §54.9831-1(c)(3)(vii)).